PRIVATE ENTERPRISE MONEY

VIII
HOW THE UNIT IS TO BE DETERMINED

THE METHOD OF FIXING AND STABILIZING

A money unit that is not sponsored and controlled by a political government naturally has no political boundaries; and is in its nature a potentially universal unit. The valun, being a non-political private enterprise money unit, is boundless in the scope of its operation; and, if successfully launched in any locality, may and should spread to all parts of the world.

There is, of course, nothing to preclude any organizations of private enterprisers from adopting valun principles and setting up units by other names, but, if this should prove to be the case, they will be as foreign to each other as are the present political units, of which there are some sixty. The probable evolution, however will be an extension of the valun - because, if it demonstrates its success, there will be no need to imitate it - since participation in the valun system will be open to all. An universal monetary language is advantageous to all; and therefore to set up another language is to defeat the purpose of trade, which by nature is interdependent and unionist.

Thus we may approach the problem of determining and defining the valun in the consciousness that we are creating an implement of world trade as well as one to serve the members of the initial Exchange that may be organized. A review of the present polyglot money units of the world may help us in gaining this universal consciousness. All the money units of the world rate numerically lower than the dollar except the English pound which is higher.

To comprehend the meaning of the varying positions of money units in the scale, it will be helpful to refer back to the catalogue of value relatives in Study No. 5. In this example we took the sheep as the unit, thus making it the figure one and other commodities were set in mathematical relativity thereto. Thus the horse, for instance, became 5 because it was presumed to be five times as valuable as a sheep or as valuable as five sheep. Had we taken the horse as the unit, it would have become the figure 1 and the same value relationship would have made the sheep .20 or one fifth of a unit. Had the candle been taken as the unit, the sheep would have been rated 100 units and the horse 500 units. Thus we see that rating a unit numerically higher or lower does not indicate its standing in the scale of creditability.

What does indicate the standing of money units, in the scale of creditability, is the record they maintain in holding their initial position in the numerical scale. For instance, the English pound, before it began to decline, was rated at 4.86 to the American dollar. It is now officially quoted at 4.03; and, if the American cooperation in artificially bolstering it were withdrawn, it might fall as low as two or lower. That it was set originally at nearly five times the numerical level of the dollar reflected neither credit to it nor discredit upon the dollar, but that it has fallen below that level indicates discredit to it.

MONETARY ISOLATION

Political money units are artificial isolationist criteria, whereas trade is by nature unionist. Therefore trade, that should have no boundaries or difference in language, is made polyglot. It becomes necessary therefore, in international trade, to translate one political unit into another. This is called foreign exchange.

Here another sphere of relativity is created in which, as in all relativity, there is necessarily a positive pole - or the figure one. The premier unit among money units, or the figure 1, is determined by the criterion of stability among those nations having the largest foreign trade. The unit that varies the least in its power in internal trade becomes the world standard. The world standard, since the English pound surrendered its leadership, is the American dollar - which has been standard during the present century.

It happens that prior to 1934 the U. S. government committed itself to give $20.67 for an ounce of gold, and since then has been committed to pay $35. per ounce, but the fact of the original commitment had no affect upon the international rating of the dollar, nor was it changed by raising the price of gold. It meant merely that the equivalent of the dollar could be expressed in a weight of gold. The dollar is and has been for nearly a half century the international money standard regardless of the policy of the U. S. government in pegging the price of gold. Therefore all foreign exchange is dollar exchange, however some minds may be confused because of the gold pricing. As the dollar declines the purchasing power of gold declines - showing that the dollar, and not the gold, is the controlling factor. Gold does not exert its purchasing power directly upon other commodities, but vicariously through its patron, the dollar. Therefore dollar decline means gold decline. This tandem decline will continue until $35 per ounce will be (due to the depreciation of the dollar) an insufficient price for gold. Gold and the dollar will then part company and gold will trade on its actual value like all other commodities.

As all political units are foreign to each other so the valun will be foreign to all, including the dollar. In due course, if the valun demonstrates the greatest stability, it will wrest leadership from the dollar, and become the international money criterion. If and when that point is attained it will signify the doom of the political money system, and the approaching end of all national or political monies; and the world will then be united on the economic plane, regardless of its political divisions.

As stated in Study 5, any commodity or unit of value may be adopted as the money unit. However in the presence of existing money units it is expedient to make a new unit either par with or a fraction or multiple of, some existing money unit. Obviously - because the valun is to begin in the United States, and because the dollar is also the international standard - it is advisable to base the valun on the dollar. As is explained in Study 5, this implies only the key note or the starting point; and thereafter the two units become separate entities. It does not, should not and cannot imply any fixity of relationships. But if we wish to start the valun par with the dollar we must identify the dollar by date; because here has been wide variation in the power of the dollar during its lifetime. The following table, made up by the Federal Reserve Bank of New York, shows the price level, which conversely shows the increase or decline in the power of the dollar from 1913 to 1939.

                 YEARLY AVERAGE 1913 - 100

1913 100   1918 162   1923 169   1928 170   1933 130   1938 152
  14 100     19 178     24 170     29 170     34 136     39 151
  15 102     20 202     25 l72     30 163     35 143
  16 116     21 170     26 171     31 150     36 147
  17 141     22 162     27 169     32 136     37 155
    +41        00         00         -20        +12

Underneath each column of five years is shown the increase or decrease in the price level from the first year to the last in the bracket, though it should be noted that even in the 1918 to 1922 bracket, and the 1923 to 1927 bracket, where the price level returned at the end to that of the first year, there was variation in the intermediate years. From the 1913 base year the peak of the increase in the price level was in 1920 when it stood at 202, indicating that the dollar had approximately half the power of 1913. We are now approaching that level again - and of course the inflation will continue to reduce it to possible extinction.

The ideal of money unit stability has never been and can never be, attained by a political money unit. This is because it is constantly disturbed - either by the bank loan process, or by political fiscal policy. Both these influences are eliminated in the valun system; and therefore business may at last hope for and expect a money unit that has approximately the same power in one generation as another. We say approximately, since it may be too much to expect perfection, in view of possible political influences, even though the direct influence upon money be removed.

THE 1939 DOLLAR

Concurrently with the organization of the first Valun Exchange there will be organized The Central Board of Valun Exchanges, which will be the supreme authority for coordinating all Valun Exchanges. Upon it must fall the task of determining and proclaiming which dollar the valun shall be based on. We suggest the year 1939 because it was before the war inflation had exerted its influence upon the dollar, and before the price control law distorted the price index. In 1939 the price level was such that many one cent items of merchandise were on the market, a considerable number of which have since departed. The dollar is growing so small that the lowest denominations of coins are meeting with diminishing use. The unit should have such power that all fractions of it serve a broad range of usefulness in exchange.

Assuming then that the 1939 dollar is adopted as the basis of the valun, it will be necessary to compute the difference in the price level between that time and the time the valun is launched. There is no way of making the computation accurate because all price indexes are now unreliable, by reason of the price control law which makes it illegal to price items above the OPA ceilings. The affect is to mislead the price index bureau - because no dealer can afford to quote his black market prices, with the result that the price indexes reflect only "red market" prices, i.e., those prices which actually involve a loss to the dealer but which conform to the law. However, an approximation will do so long as some percentage is arbitrarily stated for the differential between the current dollar and the valun.

For instance, if, at the time the valun is adopted, it is estimated that prices are twice as high as 1939, the valun would be rated one for two of the dollar. If prices shall have risen 500% the valun will be 1 to 5. It is advisable to state some round figure approximation as the par basis - though, after current prices are stated in the two units, it will be simpler to state the price of the valun in dollars and cents. The method of quoting prices of commodities in the two units, and the price of valuns in terms of dollars, was outlined in Study 6.

SETTING THE RATIO

To proclaim the ratio of the valun to the dollar is simple enough. To make it operative is something quite different. The Central Board can proclaim the ratio - but, to make it so, the members must back it up by actual exchange transactions. This confronts us with the question as to what gives meaning to a money unit. If we think the question through we realize that nothing but practice accomplishes it. There is a popular superstition that the authority of government sponsorship, or some guarantee of redemption, or some reserve, determines the power of a money unit. But we know that money secures its meaning solely by the act of purchase - and thus the whole meaning comes from exchange itself. Nothing prior to or subsequent to or outside of exchange contributes anything. Figuratively, we may say that all the members agree to leave it to the Central Board to state the valun-dollar ratio; and we may even imagine all assembled in a room and by show of hands unanimously agreeing to accept the ratio announced. But that is not enough. Concurrence must be backed by determination through actual exchanges.

The question will be asked, "what is back of the valun?" As a matter of fact, like any money unit, until something has been exchanged for it, nothing is back of it. When it has exchanged for something, that something is back of it. Money's material backing is that which the seller surrenders in exchange for it; its moral backing is the buyer's promise to back it with an equivalent value when in turn he becomes the seller. Further than this, money has no backing and more than this it does not need, but this is indispensible. What then is needed to make the valun circulate is acceptors and prospective acceptors. The initial acceptors must be pledged to accept it for certain values which are determined by the valun-dollar ratio that has been officially adopted. Once this process begins, a mental attitude develops in the acceptors which makes them indisposed to surrender the valun for less than they gave. After the unit circulates a number of times the mental attitude of traders jells into a fixed habit of thought; and the unit has established itself firmly.

To attain this firm base, it is necessary for the members of the Exchange to be pledged to a definite price level for a period, of say three months, during which they agree to neither lower nor raise prices in terms of valuns. The purpose is to get as much backing for the valun at a given level by as many traders as may be necessary to establish a mental fixation. After such period of mutual pledge has expired, the operation of the law of supply and demand should be unimpeded. The consequence should be variation in prices of different items, some higher and some lower, but the price level should remain approximately stable.

The preservation of the stability of the unit requires no positive action. It is natural for it to remain stable. If unstability manifests itself, it is indicative of the presence of some unnatural element. The elements of destabilization are, as previously stated, inherent in the political money system; they are not native to a private money system. Competitive traders (each under the necessity of keeping costs down to meet competition) and consumers (each trying to get as much as possible for his money) tend to keep the money supply in equilibrium with goods supply, and thus maintain a stable price level. The possible factors tending to disturb price stability in a private money system are discussed under valun Study No. 5.

After the initial price control agreement among valun members has expired, only natural influences will remain; and the dollar price of valuns will reflect the stability of the valun, and the decline of the dollar under its inflationary influence. These dollar-valun prices will be quoted by the Valun Currency Counter Association as explained in Study No. 6.

Merchant members will follow these quotations in pricing their goods in dollars. Thus if the valun is quoted at $3.25, an item priced at 1 valun would be priced at $3.25, for the trade that is not in the valun system. As has been stated, all valun members will be obliged to deal with non-members on a dollar basis and therefore must maintain two sets of prices, one in valuns and the other in dollars.

The problem of determining the valun unit and stabilizing it will be the problem of only the first Valun Exchange. Succeeding Exchanges will be conditioned to its power by reason of the fact that members of new Exchanges, as a condition precedent to opening a local Exchange, must have previously traded with members of existing Exchanges, thus having accepted the valun on the basis of preceding Exchanges.

In the next Study we explain that any person or corporation anywhere would be qualified to hold Class B membership in any existing Valun Exchange. This Class B membership would entitle them to maintain an account in an Exchange and buy and sell freely, but not to overdraw the account - which is the process of creating money under the valun system, a power which is reserved to Class A members.


[Contents] - [Next section: IX. HOW THE EXCHANGE IS TO BE ORGANIZED]

Federal Reserve Note. Worth nothing.
Backed by nothing. 
 Gold & Silver Never Lie.
New $100 Front REAL MONEY
NOTICE: Entities presented are not affiliated with Freedom School.
NOTICE: If anything in this presentation is found to be in error a good faith effort will be made to correct it in timely fashion upon notification.
Specialty Areas
NOTICE: The information on this page was brought to you by people who paid this website forward so that someone such as you might also profit by having access to it. If you care to do so also please feel encouraged to KEEP THIS SITE GOING by making a donation today. Thank you. Make donation with PayPal - it's fast, free and secure!


Freedom School is not affiliated with the links on this page - unless otherwise stated.

Freedom School information served for educational purposes only, no liability assumed for use.
The information you obtain at this site is not, nor is it intended to be, legal advice.
Freedom School does not consent to unlawful action. Freedom School advocates and encourages one and all to adhere to, support and defend all law which is particularly applicable.

The noteworthy failure of the government or any alleged agency thereof to at any time rebut anything appearing on this website constitutes a legal admission of the fidelity and accuracy of the materials presented, which are offered in good faith and prepared as such by Freedom School and third parties affiliated or otherwise. If the government wants to assert that any of the religious and/or political statements that are not factual appearing on this website are in error, then they as the moving party have the burden of proof, and they must responsively meet that burden of proof under the Administrative Procedures Act 5 U.S.C. §556(d) and under the due process clauses found in the Fifth, Sixth, and Seventh Amendments to the national Constitution BEFORE there will be response to any summons, questions, or unsubstantiated and slanderous accusations. Attempts at calling presented claims "frivolous" without specifically rebutting the particular claim, or claims, deemed "frivolous" will be in deed be "frivolous" and prima facie evidence that shall be used accordingly. Hey guys, if anything on this site is found to be in error a good faith effort will be made to correct it in timely fashion upon notification.


Presentation CopyrightŠ 2007, 2010
All Rights Reserved

H O M E